Pangaea Logistics Solutions (NASDAQ:PANL) Is Paying Out A Dividend Of $0.10

Pangaea Logistics Solutions, Ltd. (NASDAQ:PANL) will pay a dividend of $0.10 on the 13th of December. This means the dividend yield will be fairly typical at 6.7%.

Check out our latest analysis for Pangaea Logistics Solutions

Pangaea Logistics Solutions' Future Dividend Projections Appear Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, Pangaea Logistics Solutions was paying out quite a large proportion of both earnings and cash flow, with the dividend being 149% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

EPS is set to grow by 57.9% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 79% which is a bit high but can definitely be sustainable.

Pangaea Logistics Solutions' Dividend Has Lacked Consistency

It's comforting to see that Pangaea Logistics Solutions has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. Since 2018, the annual payment back then was $0.14, compared to the most recent full-year payment of $0.40. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Earnings has been rising at 4.9% per annum over the last five years, which admittedly is a bit slow. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often elect to pay a larger dividend instead. This is why many mature companies often have larger dividend yields.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Pangaea Logistics Solutions' payments, as there could be some issues with sustaining them into the future. The track record isn't great, and the payments are a bit high to be considered sustainable. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Pangaea Logistics Solutions that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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